On January 24, 2020, Mr. Clark, the newly appointed cost analyst at Best Price, a discount store operating in Sydney, Australia, was asked to predict the receiving cost, an overhead cost associated with purchase orders, for the company’s operation in the April–June quarter, 2021, when 530 units are expected to be purchased. Mr. Clark collected information regarding company’s receiving cost and purchase orders (the corresponding cost driver) for the past 15 quarters.

1. Using the high-low method to estimate costs, prepare a prediction of receiving cost for the April–June quarter, 2021. 

2. Mr. Clark ran a regression analysis using the data he collected. The result was 

Using this cost function, predict receiving cost for the April–June quarter, 2021.

3. Which prediction do you prefer? Why? 

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Quarter 1/2017 2/2017 3/2017 4/2017 1/2018 2/2018 3/2018 4/2018 1/2019 2/2019 3/2019 4/2019 1/2020 2/2020 3/2020 Purchase Orders 365 380 340 665 610 625 610 650 605 630 560 405 405 595 435 Receiving Cost (A$) 3,575 3,545 3,200 5,620 4,975 5,525 5,565 5,180 4,910 5,300 4,950 4,755 4,145 5,220 4,925